THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, May 1, 1995 TAG: 9504290203
SECTION: BUSINESS WEEKLY PAGE: 13 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 93 lines
News of another profitable quarter and fewer troubled assets didn't satisfy Martin Bond.
When Seaboard Bancorp Inc. conducted its annual shareholders' meeting last Thursday evening, Bond wanted details about the company's agreement to be acquired.
Given the improvement in its financial condition during the past year, why had the parent of Seaboard Savings Bank settled for an offer of only $1.55 a share?
And with the rapid consolidation of financial institutions in the region, why couldn't Seaboard hold out for a better offer?
Others complained during the meeting that the proposed transaction would force them to take shares in a bank whose stock is not publicly traded, in contrast to Seaboard's shares.
Citing advice from the company's attorneys, Seaboard president P. Douglas Richard told Bond and others that he could not elaborate on Wednesday's announcement of an acquisition agreement with Bank of Hampton Roads in Chesapeake.
Shareholders, he said, should wait for details in the proxy statement that will be distributed before a vote on the proposed merger.
Seaboard and Bank of Hampton Roads jointly announced Wednesday that the bank had tentatively agreed to pay $7.7 million, or $1.55 per share, in cash and stock for Seaboard. The price works out to 1.35 times Seaboard's book value of $5.7 million, or $1.15 a share.
The proposed transaction still requires a definitive agreement, approval by banking regulators, and a favorable vote by shareholders of both institutions.
Although Seaboard did not spell out the reasons for agreeing to the Bank of Hampton Roads offer, the company's prospects appeared limited. Until 1994, its thrift subsidiary had suffered years of heavy losses from troubled real estate loans and still operates under restrictions imposed by federal regulators.
On the same day of its annual meeting, Seaboard reported first-quarter net income of $185,859. That was down 5 percent from $194,817 in the year-earlier quarter despite a 6 percent increase in net interest income. Per-share earnings were flat at 4 cents for both quarters.
Seaboard's shares, which are traded over the counter, closed Friday at 1 3/8, unchanged for the week.
In an otherwise upbeat assessment of conditions at Life Bancorp Inc., its chief executive officer told shareholders Thursday that Life's thrift subsidiary could be hurt by a proposed change in the premiums that financial institutions pay for deposit insurance.
The Federal Deposit Insurance Corporation has proposed cutting the premiums for commercial banks from 23 cents per $100 of insured deposits to 4 cents. But the premiums paid by Life and other thrifts would remain at 23 cents, according to the FDIC proposal.
Any reduction in their insurance premiums would provide banks and thrifts with immediate benefits in the form of lower overhead and greater flexibility when setting interest rates on deposits.
``We have lived with the 23 cents per $100 level for some time, but when we have to compete with institutions paying a much lower level, there is a substantial penalty,'' president and CEO Edward E. Cunningham told shareholders at Life's annual meeting.
To address the possible damage from such a disparity, ``something must be done at the congressional level, and I think something will be done,'' Cunningham said.
In March, the FDIC predicted that the insurance fund for commercial banks would reach the congressionally mandated level of $1.25 per $100 of insured deposits by mid-1995. In recent years, the fund has benefited from robust earnings at commercial banks and a sharp decline in bank failures.
However, the FDIC insurance fund for thrifts had only 28 cents for every $100 of insured deposits at year end 1994. And that was well below the goal of $1.25 per $100 of insured deposits set by Congress, the FDIC said.
The prospect of a reduction in insurance premiums for commercial banks without similar action for thrifts has prompted heavy lobbying by thrifts in Washington and talk of combining the FDIC's two deposit-insurance funds.
During Life's first annual meeting as a public company, shareholders approved the board's recommended slate of nine incumbent directors by more than 87 percent.
However, two board-endorsed proposals were approved by much narrower margins and provoked questions from skeptical shareholders. A proposal for a stock-option plan that would reward officers and key employees was approved by only 58 percent of Life's 10.91 million shares.
A separate proposal for a plan that would award Life stock to key employees and directors was approved by only 55 percent of outstanding shares.
In response to questions about the prospects for a stock buyback, Cunningham said the company would consider repurchasing as much as 5 percent of its outstanding shares if federal regulators approve its application to do so. In addition, the company would like to use some of its abundant capital acquiring other financial institutions or branches, he said.
Life's shares ended the week at 13 3/4, up 1/4. by CNB